Recruitment activity continues to increase at robust pace in January

Hiring activity continued to increase at a robust pace across the South of England in January, according to the latest KPMG and REC, UK Report on Jobs: South of England survey. Permanent placements rose sharply, while temp billings growth quickened to a five-month high amid reports of strong demand for staff and rising activity at clients. However, candidate shortages led to further substantial increases in rates of starting pay for both permanent and short-term staff. Notably, the supply of permanent workers fell at a sharper rate than in December.

Vacancies data showed slightly softer rises in demand for both permanent and temporary staff at the start of the year, but in both cases the rate of expansion was well above the long-run series trend.

The KPMG and REC, UK Report on Jobs: South of England is compiled by IHS Markit from responses to questionnaires sent to around 150 recruitment and employment consultancies in the South of England.

Permanent staff appointments continue to rise rapidly in January

Permanent placements across the South of England increased again at the start of 2022, as shown by the respective seasonally adjusted index posting above the neutral 50.0 level for the eleventh month in a row. The rate of expansion eased slightly from December, but remained much quicker than the series average and rapid overall. The upturn was also the steepest seen of all four monitored English regions. The softest increase in permanent placements was meanwhile seen in the North of England.

Recruiters frequently mentioned that increased market activity and strong demand for workers supported growth.

Recruitment consultancies based in the South of England signalled an increase in temp billings during January, thereby stretching the current sequence of expansion to 18 months. Higher temp billings were generally linked to robust demand for staff and efforts to meet rising workloads at clients. The rate of growth quickened to a five-month high and was substantial, albeit the softest seen of all four monitored English regions. The steepest increase in temp billings was recorded in the North of England.

Permanent staff vacancies in the South of England continued to rise at the start of the year. The rate of growth eased to a 10-month low but remained sharp by historical standards. The pace of expansion was also broadly in line with the UK average.

Demand for temporary staff also increased at a slower, but still sharp pace. Notably, the latest upturn in temp vacancies was the softest since April 2021, and weaker than that seen on average across the UK as a whole.

Steeper reduction in permanent candidate supply

The availability of workers to fill permanent roles in the South of England declined for the eleventh month in a row in January. The rate of deterioration quickened for the first time since last August and was rapid, albeit not as severe as those seen during the summer of 2021. The reduction was also slightly quicker than the UK-wide trend.

Reports from panellists suggested that skills shortages, a generally low unemployment rate and a reluctance to switch roles due to COVID uncertainty had dampened candidate numbers.

Each of the four monitored regions saw permanent staff supply fall in January, with London recording the sharpest reduction.

January survey data signalled a further easing in the rate of deterioration in temporary candidate availability across the South of England. Furthermore, the latest drop in temp labour supply was the slowest seen for nine months and not as severe as that seen on average across the UK as a whole. In fact, the South of England recorded the softest fall in temporary candidate numbers of all four monitored English regions, while the North of England noted the quickest reduction.

When explaining the latest fall in temp candidate numbers, recruiters often blamed strong demand for staff, a greater preference among candidates for permanent roles and IR35 changes.

Starting salary inflation holds close to record pace

The seasonally adjusted Permanent Salaries Index posted above the no-change 50.0 level to signal a further increase in salaries for new permanent joiners in the South of England during January. Notably, the rate of inflation was rapid and only exceeded by those seen through the final quarter of 2021. Recruiters frequently mentioned that demand for staff outstripped supply, and therefore clients had to increase pay offers to secure staff. Starting salaries rose at a similarly sharp rate across the UK as a whole, with London noting a record rise in salaries.

Recruiters based in the South of England registered an increase in average hourly rates of pay for temp staff in January, as has been the case in each of the past 14 months. The rate of inflation was substantial, despite softening to the slowest since last August. The increase was also quicker than those seen across the three other monitored English regions. Higher rates of temp pay were often attributed to greater competition for scare workers.

Commenting on the latest survey results, Ian Brokenshire, Senior Partner for KPMG in the South West, said: “The South West’s businesses and jobseekers are clearly buoyed by the return to some stability in the economy, which resulted in a healthy acceleration of both permanent and temporary placements during January. The challenge of finding candidates will only increase as the availability of permanent staff declined again, month on month. The shortage of available candidates continues to have a knock-on effect on the inflation of starting salaries across the region. Employers will hope that this begins to plateau and eases some pressure on their costs as supply finally catches up with demand over the coming months.”

Neil Carberry, Chief Executive of the REC, said: “The jobs market is still growing strongly at the start of 2022. Recruiters are working hard to place people into work as demand from employers continues to rise. With competition for staff still hot, companies are having to raise pay rates for new starters to attract the best people. And the cost of living crisis means there is also more pressure from jobseekers who want a pay rise. But pay is not the only important factor – companies must think about all aspects of their offer to candidates to ensure they get the staff they need. This will be important as firms’ spending is under pressure from inflation as well.

“Government’s role is to manage inflation, but also to ensure that they do not discourage investment – that is what will drive the economy to grow through this year. Now is the wrong time to be raising National Insurance, the biggest business tax. But politicians should also be thinking about longer-term workforce planning, making sure we have the skills the country needs for the future. This will take a collaborative effort between the public and private sectors, and the recruitment industry stands ready to help.”